T cell receptor recognition of antigen can lead either to T lymphocyte differentiation and proliferation or to a state of unresponsiveness, which is dependent on whether appropriate costimulatory signals are provided to the mature T cell. We have investigated a novel intracellular signaling pathway provided by the costimulatory molecule CD28. CD28 engagement triggers the activation of an acidic sphingomyelinase (A-SMase), which results in the generation of ceramide, an important lipid messenger intermediate. A-SMase activation by CD28 occurred in resting as well as in activated primary T cells or leukemic Jurkat cells. In contrast, ligation of either CD3 or CD2 did not result in A-SMase activation. Overexpression of recombinant A-SMase in Jurkat T cells substituted for CD28 with regard to nuclear factor-kB activation. These data suggest that CD28 provides an important costimulatory signal by activation of an acidic sphingomyelinase pathway.